Crypto Asset and Liabilities

HMRC has specific guidelines on the taxation of crypto assets and liabilities. It’s essential to understand these requirements to ensure compliance and optimize your tax position. Below is a detailed tax advice guide based on HMRC directives.


Key Points for Individuals

  1. Taxable Events

    • Buying and Selling: Selling crypto assets for fiat currency or other cryptocurrencies.
    • Exchanging: Swapping one crypto asset for another.
    • Using as Payment: Using crypto assets to pay for goods or services.
    • Mining and Staking: Income from mining and staking activities.
  2. Capital Gains Tax (CGT)

    • Calculation: Capital gains tax is payable on the profit made from selling crypto assets.
    • Allowable Costs: Include purchase price, transaction fees, and costs of advertising for a buyer or seller.
    • Annual Exemption: Each individual has an annual CGT exemption (£12,300 for the 2023/24 tax year).
    • Reporting: Capital gains need to be reported on a self-assessment tax return. Losses can be used to offset gains in the same tax year or carried forward.
  3. Income Tax

    • Earnings from Employment: Crypto assets received as payment for employment are subject to Income Tax and National Insurance Contributions (NICs).
    • Mining and Staking: Income from mining and staking is subject to Income Tax, with allowable deductions for expenses related to these activities.
    • Airdrops and Forks: Tax treatment depends on the nature of the receipt. If received in return for a service, it’s subject to Income Tax.
  4. Record Keeping

    • Maintain detailed records of all transactions, including dates, amounts, and values in GBP at the time of each transaction.
    • Records of the cost basis, disposal proceeds, and any associated transaction fees should be kept.

Key Points for Businesses

  1. Trading vs. Investing

    • Trading: Businesses trading in crypto assets must pay Income Tax or Corporation Tax on trading profits.
    • Investing: If crypto assets are held as investments, any gains are subject to Corporation Tax on chargeable gains.
  2. Valuation and Accounting

    • Valuation: Crypto assets should be valued at the fair market value on the date of the transaction.
    • Accounting Standards: Follow relevant accounting standards for recording and reporting crypto assets.
  3. VAT

    • Crypto as Payment: When crypto assets are used as payment, VAT is due on the goods or services supplied, not on the crypto asset itself.
    • Exchanges and Brokerage Services: Most activities involving the exchange of crypto assets for fiat currency are exempt from VAT.
  4. Employee Payments

    • Crypto assets given to employees as part of their remuneration package are subject to PAYE and NICs.
    • Employers must report the value of the crypto assets at the time of payment.

Practical Steps for Compliance

  1. Use Reliable Tools

    • Utilize crypto accounting software to track transactions and calculate gains/losses accurately.
    • Tools like CoinTracker, Koinly, or CryptoTrader.Tax can simplify record-keeping and reporting.
  2. Professional Advice

    • Seek advice from tax professionals with experience in crypto taxation to ensure compliance and optimize your tax position.
    • Consider periodic reviews of your crypto transactions to stay updated with any changes in HMRC guidelines.
  3. Regular Reporting

    • File self-assessment tax returns accurately and on time.
    • For businesses, ensure regular filing of VAT returns and corporate tax returns as applicable.

Example Calculation for Individuals

  • Purchase: 2 BTC bought at £20,000 each.
  • Sale: 1 BTC sold at £30,000.
  • Allowable Costs: £100 transaction fees.

Capital Gains Calculation:

  • Proceeds: £30,000
  • Cost Basis (1 BTC): £20,000 + £50 (half of transaction fees)
  • Gain: £30,000 - £20,050 = £9,950

If this gain falls within the annual CGT exemption, no tax is due. Otherwise, it’s subject to CGT at 10% or 20%, depending on the individual's income tax bracket.


Crypto assets and liabilities are subject to specific tax treatments under HMRC guidelines. By understanding taxable events, keeping meticulous records, and seeking professional advice, individuals and businesses can ensure compliance and optimize their tax positions. For personalized advice, consult with Berkeley accountants for cryptocurrency taxation.

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